Brickwork Ratings reaffirms the ratings for the Bank Loan Facilities of Rs. 16.97 Crs. of Zecha Precision Tools Ltd. (Formerly Known as Dagger Master Tool Industries Ltd).
Particulars| Facilities** | Amount (Rs.Crs.) | Tenure | Rating# | ||
|---|---|---|---|---|---|
| Previous | Present | Previous (20 Aug 2020) |
Present | ||
| Fund Based | 13.95 | 16.97 | Long Term |
BWR BB/Stable
Assignment |
BWR BB
/Stable Reaffirmation |
| Grand Total | 13.95 | 16.97 | (Rupees Sixteen Crores and Ninety Seven lakhs Only) | ||
Brickwork Ratings has reaffirmed the rating at BWR BB/Stable for the Bank Loan Facilities of Rs.16.97 Crore of Zecha Precision Tools Limited (ZPTL). BWR believes that Zecha Precision Tools Limited business risk profile will be maintained over the medium term. The 'Stable' outlook indicates a low likelihood of rating change over the medium term.
BWR has essentially relied upon the audited financial statements of Zecha Precision Tools Limited for FY19,FY20, FY21 and projections of FY22 and FY23 and publicly available information and information/clarifications provided by the entity’s management.
The rating reaffirmations continue to take into account the Extensive experience of Management, comfortable financial profile. The rating is constrained by Modest and fluctuating scale of operation with fluctuating profit margins,Working capital intensive nature of operations, Customer and supplier concentration risk and Foreign exchange fluctuation risk.
KEY RATING DRIVERSCredit Strengths:
The Company is in existence for more than 4 decades in the same line of business and has seen complete business cycles with a good track record of the company the promoter's also possess more than 4 decades of experience in the same line of business.
The capital structure of ZPTL remained moderately comfortable with Total Debt/TNW remaining in the range of 1.12x to 1.33x during the last three balance sheet dates ended March 31, 2021. Furthermore, the debt coverage indicators also stood at a moderate level
Over the years of operations, ZPTL has established long-term relationships with its customers. However, the customer and supplier profile remained well-concentrated with top 5 customers comprising 76% of the total sales and top 5 suppliers comprising 75% of total purchases in FY21.
ZPTL is exposed to foreign exchange fluctuation risk; given ZPTL imports 99% of its raw material. Moreover the company also benefits from the natural hedging through exports (contributes ~80%) which mitigates the fluctuation risk to an extent. Nevertheless, the foreign exchange fluctuation risk continues to exist due to timing differences.
The operations of ZPTL are working capital intensive in nature due to funds blocked in debtors and inventory. As a result, the conversion cycle stood higher at 231 days in FY21 (vis-à-vis 147 days in FY20). On the other hand, the company receives moderate credit from its suppliers, and hence, the utilization of working capital limits remained high.
The total operating income of ZPTL has remained to fluctuate in the range of Rs.18.29crore to Rs.26.15 crore during FY19-FY21. Nevertheless, the overall scale of operations continues to be modest with a modest tangible net worth base at Rs.14.11 crore as on March 2021. Further, the profit margins stood moderate with operating margin at 20.32% and the PAT margin at 1.96% as on FY21.
The ratings of ZPTL are arrived at on a standalone basis after an independent evaluation of its financial risk profile. For arriving at its ratings, BWR has applied its rating methodology as detailed in the rating criteria hyperlinks.
RATING SENSITIVITIES
Positive: The rating will be upgraded if the company is able to achieve significant growth in revenue and improvement in profitability backed by a favourable industry scenario.
Negative: The rating may be downgraded in case the revenues of the company and profits substantially plunge from the current levels and gearing and debt service metrics deteriorates.
LIQUIDITY INDICATORS - Adequate
The cash and bank balance stood at Rs. 1.09 Crore as on March 2021 (vis-a-vis Rs.0.99 Crore as on March 2020) , furthermore during H1FY22 the cash and bank balance stood at Rs. 0.30 Crore. The current ratio stood moderate at 1.32 times as on March 31, 2021 as against 1.07 times as on March 31, 2020, whereas the conversion cycle stood high at 231 days in FY21 as against 147 days in FY20 with an high level of inventory period of 289 days in FY21 and 67 days of receivables, Moreover the company has to maintain high level of inventory to gauge customers demand with creditor at 125 as on March 2021 due to which the average fund based working capital utilization stood high at 87.3% for the past 7 months ended october 2021.
ABOUT THE ENTITYZecha Precision Tools Ltd. was incorporated in the year 1980 as Dagger Dagger Master Tool Industries Ltd (DMTIL) and the name got changed on 24th April 2019.The company was promoted by Mr. Vidhu Nevatia and now under the leadership of Jyotsna Nevatia, Reiner Dieter Kirschner, Vidhuvadan Nevatia, Stefan Franz Zecha, Vinay Tendulkar Harishchandra, Arjun Nevatia.The company is engaged into manufacturing and trading of solid carbide micro tools and precision tools.The company has offices in Mumbai and Pune and Manufacturing Units in Aurangabad.
KEY FINANCIAL INDICATORS (Standalone)| Key Parameters | Units |
FY 20-21 (Audited) |
FY 19-20 (Audited) |
|---|---|---|---|
| Operating Revenue | Rs.Crs. | 18.29 | 20.21 |
| EBITDA | Rs.Crs. | 3.72 | 3.39 |
| PAT | Rs.Crs. | 0.36 | 0.55 |
| Tangible Net Worth | Rs.Crs. | 14.11 | 13.86 |
| Total Debt/Tangible Net Worth | Times | 1.13 | 1.12 |
| Current Ratio | Times | 1.32 | 1.07 |
Nil.
RATING HISTORY FOR THE PREVIOUS THREE YEARS (including withdrawal and suspended)| Facilities | Current Rating (2021) | 2020 | 2019 | 2018 | |||||
|---|---|---|---|---|---|---|---|---|---|
| Type | Tenure | Amount (Rs.Crs.) |
Rating | Date | Rating | Date | Rating | Date | Rating |
| Fund Based | LT | 16.97 |
BWR BB/Stable
(Reaffirmation) |
20Aug2020 |
BWR BBStable
(Assignment) |
20Dec2019 |
BWR BB- Stable
(Downgrade/ISSUER NOT COOPERATING*) |
NA |
NA
|
| Non Fund Based | ST | NA |
NA
|
NA |
NA
|
20Dec2019 |
BWR A4
(Reaffirmation/ISSUER NOT COOPERATING*) |
NA |
NA
|
| Grand Total | 16.97 | (Rupees Sixteen Crores and Ninety Seven lakhs Only) | |||||||
BWR complexity levels are meant for educating investors. The BWR complexity levels are available at www.brickworkratings.com / download / ComplexityLevels.pdf. Investors queries can be sent to info@brickworkratings.com.
Hyperlink/Reference to applicable Criteria| Analytical Contacts | |
|---|---|
|
Durga Lalit Purohit Ratings Analyst durga.lp@brickworkratings.com |
Ajit S Jagnade Senior Manager - Ratings Board : +91 22 2831 1426, +91 22 2831 1439 ajit.j@brickworkratings.com |
| 1-860-425-2742 | media@brickworkratings.com | |
| SL.No. | Name of the Bank/Lender | Type Of Facilities | Long Term(Rs.Crs.) | Short Term(Rs.Crs.) | Total(Rs.Crs.) | |
|---|---|---|---|---|---|---|
| 1 | Axis Bank Ltd. | Term LoanSanctioned | 2.05 | _ | 2.05 | |
| 2 | Axis Bank Ltd. | Term LoanSanctioned | 0.02 | _ | 0.02 | |
| 3 | Axis Bank Ltd. | Term LoanSanctioned | 2.85 | _ | 2.85 | |
| 4 | Axis Bank Ltd. | Term LoanSanctioned | 0.73 | _ | 0.73 | |
| 5 | Axis Bank Ltd. | Term LoanSanctioned | 2.18 | _ | 2.18 | |
| 6 | Axis Bank Ltd. | Cash CreditSanctioned | 5.50 | _ | 5.50 | |
| 7 | Siemens Financial Services Private Limited | Term LoanSanctioned | 1.02 | _ | 1.02 | |
| 8 | Siemens Financial Services Private Limited | Term LoanSanctioned | 2.62 | _ | 2.62 | |
| Total | 16.97 | 0.00 | 16.97 | |||
| TOTAL (Rupees Sixteen Crores and Ninety Seven lakhs Only) | ||||||
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